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The relationship of the Yuan (CNY) to the British pound will become significant

Examining the economic impact of the British exit from the European Union likely won’t be a clear or precise process for several years to come.

It was an incredibly dramatic economic and geopolitical development, and it will take us a very long time to be able to accurately identify any lasting effect it had on other major economies in the world. But now that it’s been a few months since the “Brexit,” we can at least look at some of the early impact in the UK, as well as at how the change has affected the relation of other major world currencies to the British Pound.

People who deal with the Chinese economy, in particular, may be keeping a close eye on the aftershock in the UK. Following the Hinkley Point approval, which will give Chinese interests a central role to play in the UK’s nuclear industry moving forward, there figures to be more activity between the two economies. The relationship of the Yuan renminbi (CNY or RMB) to the British pound will become more and more significant, not only with regard to the Hinkley Point approval but in light of the fact that Chinese businesses and individuals have shown increasing interest in the idea of investing in British properties. This is not to say the Chinese are necessarily hoping for a weakened British economy, but such a trend could be beneficial to some.

Where immediate economic consequences are concerned, however, the UK actually seems to have escaped some of the most dire potential outcomes. Last month, an article asserting that Britain had avoided an economic disaster (not exactly the bar you want to have to clear, but nevertheless a good sign) pointed to several factors as positive indications. These included a falling unemployment rate, steady prices, rising consumer spending, and even increased wages over the summer.

Comparing this report to some of the dire predictions we saw around the time of the EU referendum vote and in the immediate aftermath of the Brexit, and the outlook appears to be fairly strong for the UK. One report on the impact of the referendum used the phrase immediate and profound shock to describe what the UK would go through economically if it left the EU. It pointed to rising unemployment, lowering GDP, and falling wages as likely consequences. Comparing last month’s findings with these predictions, one could argue that things have gone fairly well—though a handful of months is still a very small sample size for measuring the impact of something as significant as the Brexit.

What may be more relevant in the meantime to much of the world – and again, to China specifically –is looking into how other major economies now stack up against that of the UK. This is most easily done by looking into currency pairings. Interestingly enough, three major currencies—the Chinese Yuan (or RMB), the Euro, and the U.S. Dollar—have all followed strikingly similar patterns in their relationships to the British Pound. Take a look at the numbers for each currency (which you can find in more detail on any reliable forex chart).

CNY/GBP

The CNY/GBP currency pairing measures the Chinese Yuan’s strength against the pound. On June 23, the date of the Brexit decision, 1 CNY was equal to 0.10203 GBP. On August 15, the peak of the CNY/GBP pairing since the Brexit, that number was up roughly 15 percent, to 0.11701. At the time of this writing, the number is still up about 11 percent from June 23, at 0.11363. The numbers show that the CNY/GBP pairing has been about 11-15 percent stronger consistently since the UK’s decision to leave the EU.

EUR/GBP

The EUR/GBP pairing measures the euro against the pound, and may be the pairing that most independent analysts (as well as British citizens) are most interested in tracking. And from a percentage standpoint it has performed almost exactly as the CNY/GBP has. On June 23, 1 EUR was equal to about 0.76336 GBP. The EUR/GBP peaked on August 16 at 0.87133 (about a 14 percent increase), and at the time of this writing it’s down to an 11 percent boost since June 23, at roughly 0.85088.

USD/GBP

The pattern between the U.S. dollar and the pound is very similar, though by a small measure it’s the strongest of the bunch. It’s worth considering here that the Dollar was actually strengthening against the pound even before the Brexit, due to both Brexit uncertainty in the UK and a strengthening U.S. economy. But let’s look at the specific numbers. On June 23, the USD/GBP pairing was at 0.67098. It peaked on August 15 at 0.77636 for nearly a 16 percent jump, and at the time of this writing, at 0.75789, it’s still up about 13 percent from June 23.

Again, these chart fluctuations all follow a very similar pattern. But what seems to be true is that the U.S., continental Europe, and perhaps most surprisingly China have all held up very well against the typically strong British pound in the months since the Brexit. Things have settled down slightly from those mid-August peaks, but it could be that these major economies are settling into relationships that are about 10-15 percent stronger from where they were before the Brexit.

That, even if the UK’s economy at home continues to avoid disaster, is worth keeping an eye on.